One of the most common questions I get asked is, “What skills do I need in order to become a successful real estate investor?”
After thinking about this question and discussing it with other experienced, successful real estate investors, there are three main themes that continued to pop up over and over again. Most investors attribute their success to marketing for deals, knowing how to be an effective negotiator, and their ability to think creatively.
However, the one skill most investors needed to hone the most was their negotiations. Unlike marketing and creative deal structuring, negotiations seem to be the one skill that most people liked the least. The thing is, it doesn’t need to be like that at all!
This may surprise you, but everyone is a born negotiator. Yes, you read that correctly. Even you are a born negotiator. The problem is most of us, somewhere along the way, stopped negotiating.
From the time we are born we are negotiating. As an infant you screamed for food when you were hungry. As a child you simply screamed when you didn’t get what you wanted, all the way up to those teenage years. Just ask any parent out there with a teenager what happens when their newly licensed teenager wants the car and they say “NO.” Does that teenager go away or does that teenager “double down” and go all in as if their life depends on getting the car Friday night.
Yet, somewhere along the line, usually in our late teens to early twenties, we decide we don’t like to negotiate and would prefer to avoid it if at all possible. It is at this point that we begin to think of negotiations as more of a confrontation than our ability to communicate with our counterpart. In the case of real estate investing, our counterpart is typically the seller.
What if I could give you three simple strategies to change all that? As I said, there are very few people who actually like to negotiate. If you are anything like me, I hated negotiations. In fact, at one time I saw negotiations as more of a task to be avoided or completed as quickly as possible or even worse, handed over to someone else. It wasn’t until I understood that negotiation had more to do with communication and less to do with confrontation or competition.
Once I figured out that all negotiation skills are is communication skills it changed everything. Whether you are a timid negotiator or a competent skilled negotiator there are three very basic skills you need to know in order to become a skilled and more confident negotiator.
Listening to understand
Since a negotiation is all about communications it’s no wonder that listening is the first thing you need to master. However, this doesn’t mean that listening is the easiest skill for you to learn. You need to listen to understand which is quite different from what most of us do, which is listening to respond.
Instead, learn to shut off that inner voice going off in your head. If we are too focused on trying to come up with a reply for what the seller is saying, we will miss valuable bits and pieces of information. It is in these hidden nuggets that we get a better understanding of what our seller’s needs are. Once, we understand our seller we can work with them and even help them to create an offer that best suites our and their needs. Giving the seller the relief they really seek.
“Zip It!” isn’t just a clever phrase an exasperated parent or teacher told us as a child. Tied right along with listening to understand, is silence. The majority of people out there are uncomfortable with silence. This is probably more true today than ever before. Yet, it is through silence that the magic in negotiations is possible.
I’ll be honest, silence is uncomfortable, especially when sitting face-to-face or across from a seller. Use that uncomfortable silence to your advantage. If I were to tell you, you can save yourself an extra $50,000 on that property or even an extra $5,000 from that contractor simply by asking a question and remaining silent, would you do it? Of course you would.
That seller or contractor doesn’t like silence anymore than you do. So what do you think happens when you’re silent? The person you are negotiating with will start to fill in that silence for you. If you really struggle with that uncomfortable silence like I did, just count to ten very slowly. What I learned is you will almost never get past five before the other party starts to chime in.
Get comfortable with “NO”
The third most important thing you must do is get comfortable with “NO.” The problem with most negotiations is we begin each negotiations fearing the word “no.” However, how many of us experienced investors have had a seller tell us “yes,” but once we leave we can’t reach them, or worse, we have a signed contract and the seller calls title and demands escrow be cancelled. In other words what we thought was a “Yes,” was really a counterfeit “yes.”
When you give the seller permission to say “no” you are getting past trivial issues to the real issues. You and the seller are able to have decision-based negotiations. What is left to negotiate when you get a “yes”? Nothing, the seller has agreed, but when you don’t first uncover all of the seller’s objections and give them permission to say “no” you end up with a counterfeit “yes” instead of the “heck yes” you really want. It is the no’s that lead up to the “heck yes” and your ultimate payday.
Negotiation is a skill all of us were born with. Negotiations don’t require any special talent, just a willingness to practice and get better at it. In your next negotiation remember to listen to understand, use silence (don’t fill in the quiet with unnecessary chatter), and give your counterpart (seller) permission to say “no.” I guarantee this will be a game changer, not just for your real estate business, but when you buy your next car or even when dealing with family, friends, and colleagues.
By Maria Giordano